Network benchmarking firm Opensignal has published new analysis of the “competitive headwinds” facing Three UK in the mobile market, which finds that the operator’s struggles are “driven by a low subscriber base and high churn resulting from many factors“. But it also warns that the situation could get worse if the proposed merger with Vodafone is rejected.
Just to recap. The proposed mega-merger (here), which has been promoted by both operators as something that would be “great for customers, great for the country and great for competition” (i.e. resulting in a £11bn investment to upgrade the country’s 5G mobile broadband infrastructure), would see Vodafone hold a 51% slice of the business and CK Hutchison (Three UK) retain 49%.
However, opponents of the deal warn that it could result in several negative outcomes, such as the potential for higher prices due to the lessening of competition at both the retail and wholesale (MVNO) level via the reduction in primary network operators from four to three.
The Competition and Markets Authority (CMA), which has yet to approve the deal, have also questioned whether the claimed customer benefits will actually materialise. The authority similarly stated that both operators would in fact “continue to compete with each other, as well as with other mobile operators, in a broadly similar way as today” if the deal didn’t go ahead.
What does Opensignal say?
The new analysis from Opensignal leverages data from their Subscriber Analytics solutions to offer insights into the level of competitive churn at Three UK. The data suggests that the operator has been “struggling competitively” (i.e. it has a small subscriber base and high competitive losses relative to its market share), although this much was already obvious from their financial results.
For example, over the last year, Three UK has seen more and more of its losses going to virtual operators (MVNO) on their own network (primarily iD Mobile [Currys] and Smarty – the latter is Three’s own sub-brand).
Opensignal concludes that Three’s struggles are driven by a low subscriber base and high churn resulting from many factors “including the halted expansion of its 5G network and pressure from both its own budget sub-brand and competitively from MVNOs such as iD Mobile“, which compete heavily on price and offer flexible contracts.
“If these issues are not addressed they could lead to an even more precarious financial situation for Three, making it even harder for Three to resume 5G expansion if the merger were not to happen for some reason. This in turn could lead to even more Three customer churn as other providers have more capital to invest in their networks,” said Opensignal.
The reality here is that CK Hutchison would most likely have to find a way of pumping more investment into Three UK, assuming the merger didn’t proceed.